We are revising our outlook on Sumitomo Life to positive from stable and affirming our 'A' ratings on the company. The positive outlook reflects our view that there is at least a one-in-three chance that Sumitomo Life's prospective capital could continue to improve and reach a level commensurate with higher ratings within the next two years. We base our assessment on the capital increase fueled by its newly issued bonds and on its prospective accumulation of equity-like reserves.

Sumitomo Life improved its capital in fiscal 2016 (ended March 31, 2017) by accumulating more equity-like reserves, including reserves against price fluctuations of stocks and bonds, and issuing hybrid bonds totaling ¥205 billion. Unrealized gains from domestic equity holdings due to favorable market conditions also boosted the insurer's capital. In addition, it issued US$1.34 billion worth of subordinated notes in September 2017, and we view the bonds as intermediate equity content that has further enhanced its capital level. We view that Sumitomo Life's capital and earnings will likely continue to improve, and as a result we have revised our assessment of its capital and earnings to moderately strong from upper adequate.